How do Mergers Create Value? A Comparison of Taxes, Market Power and Efficiency Improvements as Explanations for Synergies

Devos, Erik; Kadapakkam, Palani‐Rajan; Krishnamurthy, Srinivasan

doi:10.2139/ssrn.891445

Cited by 53 publications

(59 citation statements)

References 5 publications

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“…For example, Bresman et al (1999) and Bena and Li (2014) show that home investment benefits from knowledge spillovers from cross-border M&A activity. Further, M&As are found to increase productivity (e.g., Devos et al (2009)), management efficiency (e.g., Manne (1965), Wang and Xie (2009)), discipline (e.g., Sapra et al (2014), Scharfstein (1988) and innovation (e.g., Stiebale (2016)). Thus, in a mid-or long-term calculation, tax revenue losses should (at least partially) be compensated by additional tax revenue gains through increasing inbound in-vestment and increasing earnings in the residence country.…”

Section: Tax Policy Implicationsmentioning

confidence: 99%

“…Such a strong position is in the interest of a national tax policy maker due to positive spillovers of cross-border M&A activity to the MNE's residence country (e.g., Manne (1965), Scharfstein (1988), Bresman et al (1999), Devos et al (2009), Wang and Xie (2009), Bena and Li (2014), Sapra et al (2014), Stiebale (2016)). In addition, it is in a country's interest to strengthen the position of its MNEs as buyers in cross-border M&A because the range of suitable targets is limited for operational reasons (e.g., specific intellectual property that can be acquired).…”

Section: Introductionmentioning

confidence: 99%

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International Taxation and M&A Prices

Hagen

Pönnighaus

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. http://ftp.zew.de/pub/zew-docs/dp/dp17040.pdf Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar. Terms of use: Documents inDis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Abstract: We show that corporate taxation systems regarding foreign dividends and capital gains across 49 countries differ in many aspects, contradicting the requirements for capital ownership neutrality and indicating that ownership patterns are distorted. Consequently, a national tax policy maker may ask which taxation system improves the position of its multinational entreprises in bidding for foreign targets. To address this question, we develop a theoretical model on the impact of foreign dividends and capital gains taxation on cross-border M&A prices from the acquirer's perspective and theoretically compare different taxation systems. In a next step, we empirically validate our model in a regression analysis on a large cross-border M&A data set. Based on this analysis, we find that foreign dividends taxation rather than capital gains taxation impacts M&A prices. Finally, we provide tax policy suggestions. International Taxation and M&A Prices

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Section: Tax Policy Implicationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

International Taxation and M&A Prices

Hagen

Pönnighaus

2017

SSRN Journal

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“…Попытка количественно оценить размер созданного в результате сделки M&A на-логового щита была предпринята в [Devos, Kadapakkam, Krishnamurthy, 2009]. На выборке сделок в США с 1980 по 2004 г. среднее увеличение величины налогового щита после сделки определено в размере 1,6%.…”

Section: использование налогового щитаunclassified

M&A Synergies in Domestic M&A Deals in Russia in 2006–2014

Родионов¹,

Mikhalchuk²

2016

Russian Management Journal

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“…The two main types of synergy singled out by many authors are operational and financial (see, e.g., Baldi and Trigeorgis, 2009; DePamphilis, 2010; Devos et al, 2009;Sehleanu, 2015). Operating synergies involve the improvement of companies' operating activities.…”

confidence: 99%

Valuing synergies in strategic mergers and acquisitions using the real options approach

Loukianova

Nikulin

Vedernikov

2017

Investment Management and Financial Innovations

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The purpose of the current paper is to elaborate the model for assessing cumulative synergetic effect in M&A (Mergers and Acquisitions) deals on the basis of a real options approach. The majority of papers on the synergetic effects of M&A deals typically focus on a particular type of synergy, while the current paper proposes a model that accounts for the cumulative simultaneous effect of different types of operating and financial synergies. The methodology of our research is loosely based on Datar-Mathews real option valuation model, which is flexible and intuitive for practitioners. Formulae for assessing eight types of synergy typically arising from M&A deals are developed. They are integrated into a single model to assess their cumulative effect on the M&A deal using a simulation modelling approach. The method was used ex post to find synergy values in two recent M&A deals in the pharmaceutical industry, and produced sound results. The proposed approach to value target companies could be used by firms before an M&A deal in the due diligence process. Using this tool a company can build a bidding strategy and define the maximum premium it can pay for the target.

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How do Mergers Create Value? A Comparison of Taxes, Market Power and Efficiency Improvements as Explanations for Synergies

Cited by 53 publications

References 5 publications

International Taxation and M&A Prices

International Taxation and M&A Prices

M&A Synergies in Domestic M&A Deals in Russia in 2006–2014

Valuing synergies in strategic mergers and acquisitions using the real options approach

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